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Sunday, August 28, 2011

Ask a Korean! News: Making Batteries with Koreans

New York Times had a very interesting article about a new governmental project to promote lithium-ion battery manufacturing in Michigan, which also had a great deal to do with Korea. A few excerpts (all emphases added by the Korean):

Over the last two years, the federal government has doled out nearly $2.5 billion in stimulus dollars to roughly 30 companies involved in advanced battery technology. ... By almost any account, the White House has fallen woefully short on job creation during the past two and a half years. But galvanized by the potential double payoff of skilled, blue-collar jobs and a dynamic clean-energy industry — the administration has tried to buck the tide with lithium-ion batteries. It had to start almost from scratch. In 2009, the U.S. made less than 2 percent of the world’s lithium-ion batteries. By 2015, the Department of Energy projects that, thanks mostly to the government’s recent largess, the United States will have the capacity to produce 40 percent of them. Whichever country figures out how to lead in the production of lithium-ion batteries will be well positioned to capture “a large piece of the world’s future economic prosperity,” says Arun Majumdar, the head of the Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E). The batteries, he stressed, are essential to the future of the global-transportation business and to a variety of clean-energy industries.

(More after the jump)

Got a question or a comment for the Korean? Email away at askakorean@gmail.com.

(Continued)

Repatriating a high-tech manufacturing plant to the United States is not simply a matter of hiring the local talent. It requires good-old foreign know-how. “We call it ‘copy exact,’ ” Forcier said. “We bought a company in Korea that had the technology around this type of battery and had developed the manufacturing process there. We basically brought that here, copied it exactly and scaled it up.” A123 also brought a team of six Korean engineers to help transfer the technology to the U.S. and sent a team of Americans to Korea to learn.

I heard a similar story at LG Chem Power — a battery start-up and an American subsidiary of LG Chem, a Korean firm. LG Chem is building a factory in Holland, Mich., to make batteries for the Chevy Volt. Production depends on replicating the company’s lithium-ion plants abroad, down to the smallest detail. “In fact, we’re making it like a copy — cut and pasted from Korea to here,” Prabhakar Patil, the C.E.O. of LG Chem Power, said.

...

Federal agencies like the Department of Energy have long financed scientific research — through university grants, for instance — on technologies like lithium-ion batteries. But a basic feature of government policy is to allow corporations and entrepreneurs to pick through the results of that research, commercialize the promising ideas and let the market sort things out. In other countries, it often works differently. Governments are more willing to help companies pool information about a new industry or technology and (especially in Korea and China) assist with the early-stage commercialization of products, including the construction of plants. While Patil was getting booted from executive offices at Ford, companies in Asia, in some cases with a boost from their governments, focused on streamlining the manufacturing process. Battery performance steadily improved, and costs dropped. By the mid-2000s, it was clear that if the lithium-ion battery continued to get better at the same rate, the product might soon be suited for automobiles.

...

It is a curiosity of modern life that information companies can create extraordinary social disruptions and vast shareholder wealth but relatively few jobs. Facebook has about 2,000 employees worldwide. Google has about 29,000. Even in its new, slimmed-down state, General Motors, a decidedly less valuable company, has about 200,000 employees. What’s more, that number represents only a fraction of the people behind the production of a G.M. car. ... The most punishing effect, however, may be the one that can’t be measured — the technologies and jobs that aren’t created because the industrial ecosystem is degraded. The semiconductor industry, for example, led to the LED-lighting and solar-panel industries, both of which are mostly based in Asia now. “The battery is another fascinating example,” Pisano told me. “The center of gravity is Asia. But why?” If you go back to the 1960s, he says, the American consumer-electronics companies decided they were better off in Japan, and then Korea, where costs were lower. “And then you have to ask: Who had the incentives to make batteries smaller or more powerful or last longer? Not the car industry. The consumer-electronics industry did.” This explains why the U.S. is now playing catch-up with lithium-ion batteries. It also underscores the vulnerability of an economy with a shrinking manufacturing sector. “When one industry moves,” Pisano says, “there can be other industries in the future that follow it that you couldn’t even anticipate.”

...

Even in the battery industry, there are skeptics. Menahem Anderman, a California-based consultant, says that transforming 10 percent of the world’s automobiles into either plug-in hybrids or electric vehicles by 2020 is a pipe dream. ... Anderman still sees the dilemma Patil faced at Ford in the ’90s, when he questioned whether consumers would pay $10,000 more for an inferior car. As Anderman puts it: “Has there ever been, in the modern history of capitalist countries, a new product for which the mainstream customer paid more for less?” By his math, gas prices have to reach about $7 a gallon to make plug-in electric-hybrid vehicles attractive to consumers. To create demand for fully electric vehicles, gas prices would have to rise even higher.

- Despite all the hype about the "creative economy" based mostly on information / technology companies that might possibly invent the next iPad, the Korean is yet to encounter a forceful case that a national economy can survive as a "creative economy." In fact, the available indications point to the opposite direction -- info/tech companies may create a massive amount of wealth, but such wealth is very concentrated among the few who manage to work for such companies, or the few who have the money to invest in such companies. (For example, did you know that Facebook shares are on sale, but only a select few people can buy them?) Info/tech companies create relatively few jobs, and ordinary people can't even invest in them. Then is it a good idea for a national economy to be dominated by such companies?

Please feel free to make a countervailing case, but as of now, the Korean is convinced that a healthy economy must be largely based on manufacturing, preferably the type with high value addition such as automobiles and electronics.

- The Korean chortled at the analyst who thought electric-hybrid cars will not be attractive to customers because gas prices have to reach about $7 a gallon. There are many places in which gas prices are about $7 a gallon -- it is called the rest of the world. Just take a look at this chart. In places like Netherlands and Norway, the gas costs over $6 per gallon. In places like France, Germany and Great Britain, the gas costs over $5.50 per gallon. (In Korea, it's about $5.85 per gallon.) Is it such a stretch to think that, in a few years, the gas price will reach around $7 a gallon in parts of the world that are populated and wealthy enough to purchase these vehicles? Global perspective, please.

- It was a frequent charge leveled against the Japanese, and later Koreans, that they lack creativity based on the fact that much of their industrial beginnings involved a straight copy/paste of an existing technology. From there, many derivative arguments flowed, e.g. how Asian educational system produced mindless robots incapable of innovation, how Confucian hierarchy stifled creativity, etc.

Now, to venture into a new industrial field, American companies are employing a "copy exact" strategy. That was worth a smirk.

- Lastly, witness the horror of the big government! Big government tells companies what to do! Big government forces companies to share information! Big government... makes the nation the world leader in the industrial field that it took over?

The Korean will never truly understand the appeal of libertarianism.

Got a question or a comment for the Korean? Email away at askakorean@gmail.com.

6 comments:

> Whichever country figures out how to lead in the production of lithium-ion batteries will be well positioned to capture “a large piece of the world’s future economic prosperity,” says Arun Majumdar

Oh? And how's that, exactly? I didn't realize that Apple's battery suppliers for the iPhone had Apple over a barrel and were extracting from Apple a healthy percentage of the massive iPhone (or iPad or iPod...) profits.

I'm glad we have these very independent experts to tell us these things!

> The semiconductor industry, for example, led to the LED-lighting and solar-panel industries, both of which are mostly based in Asia now.

Solar-panel industry? Would this be the same Chinese industry that the World Bank internally thinks was massively over-subsidized and is about to enter a world of pain (which has recently started)? From http://www.zerohedge.com/news/wikileaks-cable-reveals-chinese-warning-domestic-asset-bubbles-overcapacity-early-2010-bashing-

> 5. (SBU) Asked about the European Chamber of Commerce in China's recent report on overcapacity in China, Lai said he had not yet read the report, but agreed that overcapacity was a problem in a number of industries. He highlighted the bio-energy, wind and solar industries in particular, noting that they had grown rapidly in recent years as a result of a surfeit of subsidies, and would likely face a period of restructuring. He also expected the industries targeted in the central government's ten-industry stimulus plans (Ref C) to develop overcapacity.

Moving on.

> - It was a frequent charge leveled against the Japanese, and later Koreans, that they lack creativity based on the fact that much of their industrial beginnings involved a straight copy/paste of an existing technology.

Well, while I'm quoting the diplomatic cables...

> 11. (SBU) However, Lai identified China's "terrible" educational system as presenting a serious impediment toward achieving a shift to a more knowledge-based economy. The current system promotes copying and pasting over creative and independent thought. Lai said that the system rewards students for thinking "within a framework" in order to get the grade. He described the normal process undertaken by students when writing as essentially collecting sentences from various sources without any original thinking. He compared the writing ability of a typical Chinese Phd as paling in comparison to his "unskilled" staff during his decade of work with the IFC in Africa.

Needless to say, that quote went straight into the part of my notes dealing with the low international Chinese patent rates, pervasive plagiarism, political favoritism, and general scientific fraud.

"Lastly, witness the horror of the big government! Big government tells companies what to do! Big government forces companies to share information! Big government... makes the nation the world leader in the industrial field that it took over?"

Big government will eventually be the downfall of those countries successes. Japan is a good example; they are on the decline. Right now the government and the companies in China and Korea are aligned along the same goals when markets change and government corruption increases everything will collapse. Korea is doing very well... for now. I am concerned that government corruption will ruin everything.Libertarianism works because it takes the power from the gov't and puts it in the hands of those that can and will act quickly to market changes without so much regard for political considerations.

"The Korean will never truly understand the appeal of libertarianism."

Well, how about this:

I am a libertarian. I became one (joined the party and everything) primarily because more of its ideas resonate with me than ideas coming these days from either the Democratic or Republican parties.

The libertarians I know are not survivalists holed up in Montana, plotting the overthrow of the government. They believe that government has a purpose, one that is being trampled on these days, and I agree.

Government as I understand it exists to maintain order in society so that average citizens can go about their daily lives unmolested. The assumption is, of course, that average citizens will not, while unmolested, be doing all they can to destroy themselves, their families, their communities, and their nation.

Government as I understand it exists to help those who need help and stay out of the way of those who don't.

Official U. S. government types these days seem hell-bent on destroying the **good** things about American culture, tradition, and family by substituting monolithic programs founded on bad thinking. Government types seem more and more these days to think that everyone should think and act just alike so that life can be "fair" for everyone. Striving for excellence, functioning independently, honoring anything unique about individuals or groups of people who have worked to achieve a goal . . . forget that. Government types keep babbling on about American values, the sacrifices of previous generations, the blessings of freedom, family, and our indomitable spirit . . . while they in reality keep ignoring these things or twisting them for really petty, stupid, useless purposes.

Libertarianism taken to its logical conclusion is, of course, a very selfish philosophy. Pure libertarians have probably been living in their bedrooms since they read Ayn Rand at age thirteen. But libertarianism as I see it is just a way to restore balance to the relationship between individual, group, government, and free choice.

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About TK

The Korean is a Korean American living in Washington D.C. / Northern Virginia. He lived in Seoul until he was 16, then moved to Los Angeles area. The Korean refers to himself in the third person because he thinks it sounds cool.